What Is a ‘Perpetual Future’ and How Does It Differ from a Traditional Futures Contract?
A perpetual future, or 'perpetual swap,' is a non-expiring futures contract popular in the cryptocurrency market. Unlike a traditional future, it has no fixed maturity date, allowing positions to be held indefinitely.
It maintains its price alignment with the underlying spot price through a 'funding rate' mechanism, which is a periodic payment between long and short positions.
Glossar
Leverage in Crypto
Amplification ⎊ This technique magnifies the potential return on capital by utilizing borrowed funds or collateral to control a position size significantly larger than the trader's own equity base.
Price Alignment
Equilibrium ⎊ Price alignment within cryptocurrency derivatives signifies a state where the implied forward prices derived from options contracts converge with spot market valuations, reflecting efficient market participation.
Perpetual Futures
Structure ⎊ Perpetual Futures are a type of derivative contract, native to the cryptocurrency market, that allows traders to speculate on the future price of an underlying asset without a fixed expiration date.